So you’re ready to buy a house, huh? Or maybe just thinking about it? Good for you! You’re probably excited and nervous all at once. Believe us, we know. We’ve been there. And if you’ve started looking into mortgages, your head is probably spinning.

Take a deep breath and relax. We’re here to help you figure it all out.

The first thing you need to do is take a step back. Here’s our initial piece of advice: The best time to shop for a mortgage is not when your dream house (or the closest affordable version of it) is for sale. You want to visit several lenders long before that point and get a prequalification.
Why? For several reasons:

• You will get an exact calculation of the mortgage you can afford, so you can do your house hunting based on a realistic price.
• You will be in a much stronger position to negotiate terms when you find the house you want. Prequalification is equivalent to “cash” in your pocket. Sellers’ ears perk up when they hear the words “pre-approved.” They know it’s a deal worth discussing, rather than a deal that could fall through because the buyer can’t get financing.
• The hunt for pre-approval gives you a chance to find the best deal on a mortgage, as well as clean up your credit rating, if necessary, before you finalize the terms.

When you’re looking for pre-approval on a mortgage, be sure to get a “lock-in” on the interest rate your lender quotes of 60 days—or longer, but that’s tough to get. A 30- or 45-day lock-in may not be enough if you’re just beginning to house hunt. You don’t want to pay $400 to apply for the mortgage and go through the whole exhausting process only to find out that the rate has gone up. Get the lock-in before you apply and get it in writing. If the lender won’t give it to you, find another lender.

In fact, you want to approach at least two or three mortgage lenders. These might be credit unions, S&Ls, mortgage bankers, or mortgage brokers. You’ll give the lender some financial information, such as your current salary, your debts, and other income, and the lender will use this information to present you with several mortgage options with various rates, points and loan terms.

That brings us to three basic choices you will have to make in selecting a mortgage. Let’s talk a little about each and how you make the best decisions.

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